BNB Soars, But Can It Maintain Altitude Without Its Leader?
BNB, the token powering the BNB Chain, recently reached a new peak of $723 before settling at around $705. This impressive 19% gain in the first week of June significantly outperforms the overall crypto market’s 4.2% rise during the same period. However, this rally raises questions about its sustainability, especially considering the recent incarceration of Binance founder Changpeng Zhao (CZ).
The timing of the surge is unexpected. On June 1st, CZ began serving a four-month sentence in California on money laundering charges. While this outcome was anticipated following his April sentencing, his imprisonment significantly limits his influence on Binance’s strategy and operations.
Valuation Comparison: BNB vs. Solana
Despite the recent turmoil, BNB boasts a market cap of $108 billion, a 37% premium over its competitor, Solana (SOL), which sits at $79 billion. This begs the question: do their ecosystems justify this valuation gap? Part of BNB’s advantage stems from discounts offered on Binance services and exclusive offerings through Binance Launchpad.
DApps Activity
Comparing BNB Chain’s activity with Ethereum, the leader in decentralized applications (DApps), offers another clue to BNB’s price sustainability. However, contrasting activity across different chains is challenging. BNB Chain’s low fees, facilitated by its partially centralized nature, make data manipulation a possibility.
Some analysts initially attributed the rally to excessive leverage from derivative-fueled buying. Evidence suggests otherwise. While BNB futures open interest surpassed $1 billion for the first time on June 6th, this metric only reflects the total number of outstanding contracts, not the leverage direction (long vs. short).
To gauge trader sentiment, perpetual futures, or inverse swaps, are more insightful. These contracts use built-in rates recalculated every eight hours to address leverage demand imbalances. Positive rates indicate a preference for leverage by buyers.
The funding rate for BNB futures remained below 0.03% over the past six days, translating to a weekly rate of 0.6%, a price point considered reasonable by most traders. This rate aligns with Bitcoin’s (BTC) and is lower than Solana’s (SOL) current 0.5%. Therefore, excessive leverage in BNB futures does not appear to be the driving force behind the recent price surge.
BNB Chain remains a top contender in terms of DApps volume, significantly outperforming its direct competitor, Solana. At first glance, this data appears positive for BNB. However, a closer look reveals a relatively stable number of active addresses interacting with DApps, raising questions about genuine user growth. Furthermore, BNB Chain’s $6 billion in seven-day volume pales in comparison to Ethereum’s $40.5 billion during the same period.
While BNB’s on-chain and derivatives data doesn’t raise red flags, it doesn’t necessarily support further price hikes, especially considering the cloud of uncertainty surrounding Binance’s leadership with CZ’s imprisonment.
